Stock Valutaion while ttransferring to Branches in different states

[ravi kiran]

Dear Sir

We seek your guidlines.

1) Head office in one state and branches in different states having different GST Numbers under the same PAN No.

2) Balance sheet is one only for Head office and its branches accross different states under same PAN No

3) Query: Stock transfers from Head office to branches to be valued at cost price or any profit to be added?

4) We are importing goods in head office and transferring to branches. We have landed cost available.

5) Do we need to transfer the goods to branches at cost price or do we need to add 10% of the landed cost?

Thanks & Regards

Ravi Kiran

[Rajagopalan Ranganathan]

Sir,

Q.1: - Where the recipient is eligible for full input tax credit, the value indicated in the invoice will be treated as open market value of goods or services vide proviso to rule 28 of CGST Rules, 2017. This applies only in the case of distinct person as specified in Section 25 (4) and 25 (5) of CGST Act, 2017, that is,where the same person with single PAN has taken separate registration in different States or even in the same State and Related person.

Q2: - do not require any reply.

Q3: - Stock transfers from Head office to branches to be valued at open market value.

Q.4: - The landed cost of the imported raw material will be accepted as open market value provided whatever duties of Customs paid is included in the open market value, that is, landed cost+ Customs duties payable.

Q.5: - According to rule 28 of CGST Rules, 2017, "the value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made through an agent, shall-

(a) be the open market value of such supply;

(b) if the open market value is not available, be the value of supply of goods or services of like kind and quality;

(c) if the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or rule 31, in that order:

Provided that where the goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent to ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person:

Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services.

Therefore you need not add 10% profit to the landed cost.

[Vamsi Krishna]

Hi

As per Sec 15 of CGST Act, the value of goods or services or both shall be the Transaction Value which is the price actually paid or payable for the said supply of goods and or services where the supplier and the recipient of the supply are not related and price is the sole consideration for the supply.

In your case since you are related parties, the value of supply shall be

i) Open Market Value

ii) Value of supply of " like kind and quality "

iii) Value determined by rule 4 or 5

You can recheck and ensure the open market value of the similar goods and go ahead.

If not available follow rule 4 which says " Cost of the goods plus 10% ".

You may refer Sec.15 of the Act for more clarity.

Thanks..

Our experts may modify wherever required.

[Yash Jain]

Dear Sir,

As per Rule 28 (In Reference to Section 15 of CGST Act (Read Valuation)the value of supply for goods and services or both between distinct or related persons, (Other than agent) will be as under,

1. Open market Value of supply (First Preference)
2. If the OMV as above is not available then and only then value for like kind of goods / services (Second Preference)
3. If it is difficult to deremine value from the above stated methods, then you can opt to sell goods @ 110% of Cost of Production (Take a cost auditor certificate verifying the genuineness of the method of calculation of COP). This can be used when the value of goods is very dynamic.

However if the branch , will sell the goods “as such” i.e without doing any modification/work then you can charge the branch (90% of Sale value – This time sale value will be sale price as being charged by branch to its customer). This is option to aforesaid 3 options

Caution : While doing stock transfer always attach as supporting either the sale bill to unrelated person or cost auditor certification for 110% of COP

Comments from other esteemed members highly solicited

AI Summary

Open market value governs valuation for transfers between distinct registrations; invoice value deemed OMV if recipient claims input tax credit. Valuation for transfers between a head office and separately registered branches follows a hierarchy: open market value first; if unavailable, value of goods of like kind and quality; failing that, fallback valuation rules apply. Landed cost including customs duties can constitute open market value for imported goods. Where the recipient is eligible for full input tax credit, the invoice value is deemed to be the open market value, so an additional notional margin need not be added. Supporting evidence is required when using cost-plus or unrelated sale comparables.